Chinese Tech Stock Weekly Summary

The following is excerpted from IRG's weekly stock report:

Internet

• Alibaba.com, extended its gains as investors remain excited about Microsoft Corp's (MSFT) offer to acquire Yahoo Inc (YHOO), which owns 33 percent of Alibaba. Analysts see a Microsoft-Yahoo deal benefiting Alibaba.com because of the possible synergies. Microsoft, which has agreed to retain Yahoo's relationships with all of its Asian affiliates, is also likely to reap rewards from an association with Alibaba.com. According to Deutsche Bank, Alibaba.com and its unlisted group peers may offer the combined Microsoft-Yahoo entity the best leverage in achieving a previously largely elusive foothold in the Chinese market.

• Sohu.com's (SOHU) unaudited results for the fourth quarter and fiscal year ended December 31, 2007 shows brand advertising revenues of US$32.2 million, up 46% year-on-year and 8% quarter-on- quarter. Results have exceeded the Company’s raised guidance. With the Beijing 2008 Olympic Games, the Sohu brand broadens its media reach to penetrate the Olympic audience. Sohu expects the continued expansion of the total Chinese internet population, combined with advancements in technology and its Olympic sponsorship, to help it further increase its market share among internet users. Total revenues for the fourth quarter were US$65.3 million, a 26.8% and 89.8% growth from the previous quarter and previous year, respectively. Net income was US$15.1 million or US$0.39 per fully diluted share. Advertising revenues accounted for 52% of total revenues.

• According to Chinabyte.com, Alibaba will seek cooperation with well-known international venture capitalists and provide capital to help Alisoft's partners to solve fund shortages and even help them get listed in Asia or overseas. Alisoft is an Internet-based business management software company targeting SMEs in China. Alibaba has formed an alliance with Microsoft, Cisco (CSCO), IBM (IBM), Sun, Oracle (ORCL), Dell (DELL) and Huawei and released the first software inter-link platform in Asia through which corporate users can obtain Software-as-a-Service. Alisoft's goal is to be the largest software operation platform in the world. Alibaba has already formed an Internet marketing platform based on Alibaba.com, Taobao.com, Alipay and Alimama. To offer users better experiences, Alibaba spends over RMB 100 million every year on system development.

• Google (GOOG) tries to strike up deals with the world’s largest music companies in an attempt to compete with Baidu.com (BIDU) for free music downloads in China. The Company is trying to come up with a revenue sharing agreement with music companies to allow them to give free music downloading service to Chinese web users. Baidu.com is the upstart search engine which dominates the Chinese market and gets a large proportion of its traffic from users searching for illegal music. This move is also in response to the possible tie-up between Yahoo! and Microsoft which endangers Google’s share in the West.

• China removed 200 million harmful pieces of online information in 2007. The National Office for Cleaning Up Pornography and Fighting Illegal Publications’ local branches also cracked down on more than 4,000 pornographic messages and 150 kinds of pornographic publications, cell phone novels and Internet games.

• American recruitment service provider Monster.com said that it will pay US$200 million to US$225 million in cash to the shareholders of Chinahr.com to get the remaining 55% stake. In February 2005, Monster acquired 40% stake of Chinahr.com for US$50 million and agreed that it would purchase more than 51% of the company's stake if it could not get listed within three years. In January 2006, Monster acquired another 5% stake of Chinahr.com.

Mobile/Wireless

• Apple Inc. (AAPL) and China Mobile (CHL) have called off talks to launch iPhones in China. Apple's iPhone faced a spate of technical and fee issues unique to China, including a standard revenue-sharing agreement that China Mobile disliked. Other information regarding the failed agreement was not disclosed.

• According to Sina.com, six mobile phone manufacturers have obtained 3G network licenses, which make them eligible to attend the bidding of China's TD-SCDMA. However, the names of the six manufacturers have not been disclosed. To obtain the TD network access license, mobile phone manufacturers need to pass both an indoor test and outdoor test. The indoor test was completed before the end of 2007, and the outdoor test has just been finished. More than 20 types of brand mobile phones both home and abroad were said to be participating in the outdoor test in Qinhuangdao, which involves more than 500 complicated items. According to a representative of a TD-SCDMA manufacturer, China Mobile will publicize the result for its TD-SCDMA mobile phone bidding and six mobile phone manufacturers will be the winners.

• China Unicom (CHU) has selected InnoPath's Integrated Mobile Device Management solution for firmware-over-the-air updates, advanced customer care, and security. According to Neusoft, the system integrator, the growth of China Unicom’s subscriber base has grown, prompting for the need to enhance the sophistication of value added service offerings resulting in a demand for Mobile Device Management. InnoPath’s integrated mobile device management was chosen due to its maturity and reliability that will enable China Unicom to provide subscribers with complete handset life cycle management, ensuring a better user experience and easing the introduction of new revenue generating services.

• According to the electronics research company Isuppli, Chinese cell phone shipments are expected to slow considerably this year due to lower consumer confidence. Handset shipments last year reached 229 million units, a 76.2 percent increase on the 130 million units shipped in 2006. This year, however, the rate of growth is expected to fall to 19.7 percent, reaching 274 million units. Hampering handset sales this year will be increasing inflation, rising housing prices, and major stock market fluctuations, all of which are expected to shake consumer confidence in China and elsewhere. In addition, there are no popular features to drive new sales. While new phones will ship with personal navigation systems and mobile TV, those handsets are expected to be too expensive to rise above niche products.

Telecommunications

• Huawei Technologies Co. Ltd. announced it had been chosen by China's Railway Ministry to construct a communication system for a stretch of railway in the country's south. Huawei, China's telecoms gear maker, will provide a system for the high-speed passenger transport railway, which runs from the southern city of Guangzhou to Hong Kong, via Shenzhen. No financial details were provided in the statement.

• Comtech Group Inc. (COGO) expects to expand revenue and earnings by 25 to 30 percent annually over the next five years. The strategy for the company is to sustain its current pace despite a sharp deceleration in U.S. IT spending as it has little exposure to that market. It plans to continue focusing on China, where the economy is still growing at 10 percent a year. The company wants to expand through acquisitions this year, focusing on digital media as well as new business including automobile electronics and energy saving applications.

Semiconductors

• Chinese solar wafer maker LDK Solar Co Ltd. (LDK) forecast first-quarter revenues below Wall Street analysts' estimates due to severe winter weather that disrupted shipments to its customers. Despite the revenue shortfall, LDK gave an earnings forecast that was in line with analysts' expectations. According to analysts, weather was still impacting companies in China's Jiangsu province, including Canadian Solar (CSIQ), Suntech Power Holdings (STP), Trina Solar (TSL), Solarfun Power Holdings (SOLF) and China Sunergy (CSUN). LDK forecasts first-quarter revenue of US$195 million to US$210 million, below Wall Street's average estimate of US$228.5 million, according to Reuters Estimates.

• AMD (AMD), the worldwide semiconductor manufacturer, has landed in Chengdu to set up a sales and R&D center. In recent years, AMD has been deciding among the three western cities of Chengdu, Chongqing and Xi'an as the location for its new marketing and research platform. A company representative stated that AMD would push forward with its strategy in Chengdu step by step and would first set up a sales management center in Wuhou District. AMD would also locate its second largest R&D center in China in Chengdu where the Company is responsible for supplying chips to over 55% of the net cafes and DIY computer installation centers.

Media, Entertainment and Gaming

• CDC Games, a business unit of CDC Corporation (CHINA), has increased its investment in BBMF Group, a 3G content provider in Japan. CDC now owns about 20% of the company with a total investment of approximately US$10 million. According to CDC Games, BBMF has grown rapidly in recent years. During December 2007, BBMF's mobile comics paying subscriber count surpassed 566,000 which represents a year-over-year growth rate exceeding 350%. Also during December 2007, mobile online game paying subscribers grew more than 400% year-over-year to approximately 107,000. The investments in BBMF are part of the US$100 million Online Games Developer Partner Program of CDC Games Studio. The program was established to invest in strategic game development partners to accelerate the development of new and original online games for the Chinese market and additional target geographies including Japan and the US.

• PacificNet Games has entered into a strategic alliance agreement with Spin3 and Microgaming. PacificNet Games is a subsidiary of PacificNet Inc. (PACT), a gaming and mobile game technology, e-commerce, and Customer Relationship Management company in China. Spin3 is a division of Spiral Solutions Ltd. while Microgaming is an online gaming software provider. Through this agreement, PacificNet Games will utilize Spin3's extensive line of interactive, wireless gaming products in multiple Asian markets including Cambodia, China, the Philippines and Macau. The combined offering includes mobile, web, and station based gaming, which contains Spin3's OnCash patent-pending cash and distribution chain management system, as well as online games provided by Microgaming including slots, video poker, RNG table games, and live dealer games. Spin3 has partnered with Microgaming to provide turnkey solutions for the mobile gaming arena. The complete offering includes dynamic wireless real and play-for-fun casino systems, flash casino, marketing services and innovative technologies that push the interactive gaming industry to new frontiers.

Disclaimer: IRG is not responsible for the accuracy of the news compiled within this article, which is based on publicly available information.

Comments

[DanButterfield]

Regarding Apple and China Mobile "have called talks off to launch iPhone" ... That is old news and not accurate news. iPhone will officially be launched in China albeit much of the Pacific Rim (via SingTel, et. al.) will come before China. More here >
idannyb.wordpress.com/.../
and here >
idannyb.wordpress.com/...-china’s-td-scdma-3g-m...

Regarding the six handset manufacturers chosen for TD-SCDMA launch .... The Ministry of Information Industry has issued the first licenses to vendors to operate 3G mobile handsets, using its home grown technology TD-SCDMA. They are:

v ZTE

v Hisense

v LG

v Samsung

v Lenovo

v Postcom

idannyb.wordpress.com/